Home security

A couple weeks ago a friend's home in a neighborhood that is considered "safe" and "good" got broken in. After reporting to the police, she found out they were the only house in the block that was victimized. It's both fortunate and unfortunate. The police officer said the burglars must have been watching them for some time and know exactly how their schedules were, because the burglar spent quite a bit of time in their home thoroughly searching each drawer.

When the friend asked why they were targeted, given their house was not any different from their neighbors, the officer said because they had couplets by their front door. This year's Lunar New Year was the end of January, and many burglars know by the couplets that this is likely to be an Asian family that celebrates Lunar New Year. Part of the celebration is to give children lucky money/red envelope, and therefore, the home usually has some cash and jewelries during this time of the year.

The moral of the story is not only to get a security alarm system, but also to know your neighbors and watch out for each other. The belongings might be replaced, but the feeling of being violated and the sense of insecurity will linger for a very long time.

Earthquake Insurance

In the wake of Japan's earthquake, my clients are asking me if they should be getting earthquake insurance. I am not an insurance agent, so I would not have all the answers. An article to day in LA Times provides some answers.

Quake coverage worth the cost?

According to this article

• about 12% of the homeowners have earthquake coverage
• insurance is expensive, especially if you have an older home, home that's made of masonry or brick, homes of multiple stories, and homes sit on soil that is less stable deductible is usually a percentage of the home's structural replacement value, typically 10 -15%
• coverage is limited

Talk to your insurance agent, and you can decide for yourself if you need the quake coverage.

For those who are buying condos

My most recent transaction is a condo that looked just like a detached single family home, but it was built as a condo by the developer, and has a condo designation in the tax record.

You probably know condos need an HOA cert for the loan (that includes information such as owner occupancy ratio and HOA due delinquency ratio) and your interest rate will be 1/8 or so higher than a single family home that does not have a condo designation. What you probably didn’t know is about two weeks ago, the lending rules have changed (at least for Wells Fargo), and now each lender (think bank) has to warrant its own loan. With this change banks are doing all sorts of investigations into the well-being of the HOA and are much stricter on some requirements, such as if the reserves are low.

While this is actually a good thing for the buyer (it protects the buyer from unexpected special assessments), it can SERIOUSLY delay the progress of the loan because the progress relies upon how quickly the management companies get back to the lender. This delay is probably not an issue if you have a traditional equity sale transaction (and if you have an understanding seller), it might become a huge issue if you are buying a short sale or bank owned property, especially if the bank threatens to charge you a per diem fee for closing beyond the original contract date. Not to mention also that there is a cost associated with this new condo questionnaire, and many lender are passing it onto the buyers (in my case the lender paid for it, but they won’t be doing this forever).

You might be a solid buyer with 20% down buying an owner occupied home; you still need to be aware of this potential issue. For my buyer, unfortunately, this change started in the middle of the escrow and we had no way of preparing for it. Talk to your lender upfront so you don’t get caught off guard.

Popcorn ceiling texture disposal in San Diego.

If you are a homeowner of an older home with popcorn ceiling like us, and if you'd like to remove them by yourself, I hope the following information is helpful for you.

First you need to get the popcorn texture tested to see if it contains asbestos. Although the general rule is if your house was built after 1978, it should not contain asbestos. But if your house was built around that time, it's safer to get it tested for the peace of mind. You can google a testing labs.

Our results came back positive. With that, you can only hire a licensed asbestos abatement company or you can remove it yourself. We decided to do it ourselves.

You can google how to properly remove the popcorn ceiling texture. There are websites and videos show you how to do that. What I want to talk about is how to properly dispose the popcorn material. It turns out that's harder than the job itself.

I called the San Diego Environmental Services before we started the project, and I was told to take it to the landfill on a Saturday with an appointment. The next time when we were done, I called to make an appointment and was told they do not take materials with asbestos in them. I was given a name of a company that should be able to dispose it for us. I called that company and was given the Environmental Services number in return.

It turns out you need to call a registered hazardous waste hauler/transporter. For a complete list of these companies, go to the California Department of Toxic Substances Control. As part of the disposal you will need to obtain a temporary EPA ID number from the State of California, and the company you choose to hire can help you obtain the number.

We contacted two companies. One told us to transport the waste to a Chula Vista facility. The other would send in someone to re-double-bag our waste in our driveway, and haul it away. We chose the latter for the same price. The gentleman packaged the bags (which we double bagged) with another layer of bag/plastic sheet and warning labels.

As I am writing right now, our popcorn ceiling is being transported to somewhere in Arizona. Once it safely arrives, we will receive a receipt in the mail that it reaches the destination.

It took us almost 2 weeks trying to figure out how to be a responsible citizen. Many times within this time we wanted to put them in the trash due to frustration. I hope this bit of information will save anyone who wants to remove popcorn ceiling themselves in the future from disposal frustration, and help keep the environment clean.

Re-finance and foreclosure protection.

California has protected homeowners from deficiency liability from their home mortgage since the 1930s, but this protection only applies to "purchase money" loans (ie. the loan one took out when he/she bought the hosue).

When the homeonwers re-financed to take advantage of lower interest rates in recent years, for examples, they lost the legal protections and may be personally liable for the difference between the value of foreclosed property and the amount owed to the lender.

Under current law, the lenders have up to ten years to collect this deficiency liability, which could means the family could potentially be paying the debt even years after they lost their home.

The ever more stringent lending requirements.

If you are buying a home with a loan, please be aware that the lending rules are getting tougher by the minute. One of the things you need to pay attention to is your funds.

If you plan to buy a home in the next two months, please don't move around your money unless you absolutely have to. And if you do move, please take out x from Bank A and deposit the same x to Bank B. Don't take out x, cash out y dollars, and deposit x-y dollars. Or take out x, add z dollars, and deposit x + y bucks. This will make the lender confused, and you will have plenty of explanation to do. If you have to add or subtract money, do it in another transaction.

Typically lenders need 2 months of bank statements, 2 months of pay stubs, and 2 years of work history/tax return. So have all your paperwork lined up before you enter into a contract will greatly improve the chance of a smooth transaction.

Buying a "corporate owned" property?

When you see a property listed as "corporate owned", most likely you are seeing a "flip" -- a property bought by investor(s), they usually do some work to it and resell it for a profit. FHA loans will not allow you to buy such property within 91 days of last closing. If you are buying it with a conventional loan (which traditionally doesn't have restriction on this), you need to double check with your lender if they will approve the sale.

We have heard recently that if the property is a flip, some lenders will not allow the profit to be over 15% if it's sold within 91 days from previous sale date. We are seeing more and more lenders get onto this bandwagon, and some have increase this 3-month period to 6 months.

So both buyers and investors need to be prepared.